Performance of Maturity Transformation Strategies
42 Pages Posted: 30 Nov 2020
Date Written: 2020
This paper analyses the performance of maturity transformation strategies during a period of high and low interest rates. Based on German government bond yields from September 1972 to May 2019,we construct a rolling window of bond ladders where long-term assets are financed by short-term liabilities. Risk and return increase significantly with maturity gaps for both sample periods. During the period of low interest rates, dominant strategies can be observed for short-term and medium-term gaps. With respect to different financial reporting standards, we address maturity transformation results from an earnings-based perspective as well as from a market value-based perspective.
JEL Classification: G11, G12, G21
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